Commercial Real Estate Weekly 5.10.23

Can the Highland Apartments structure in Des Moines be saved?
2 local historic preservations are exploring the possibility
By Kathy A. Bolten | Senior Staff Writer

Tanya Keith, a local historical preservationist, wasn’t optimistic that she would be able to persuade the Des Moines City Council to push the pause button on a request to demolish a century-plus-old building in the Highland Park neighborhood.

But an outcry from community members and an 11th-hour pitch by Jack Hatch, another local preservationist, was enough to get the council to delay a decision on whether to allow the demolition of a 108-year-old, three-story brick building on the southwest corner of Sixth and Euclid avenues.

"We are very excited and we have a lot of work ahead of us," said Keith, who started Hat Trick Renovation six years ago.

Hatch, though, cautioned that no guarantees exist that the building will be saved.

"If it’s possible to go forward and there is significant – and this is important – significant, realistic resources to finance it, then I think [redevelopment] can move forward," said Hatch, who owns Hatch Development Group, which has been involved in redevelopment of several century-plus-old buildings in Central Iowa.

"I have no illusions of trying to do something that’s not realistic."

Highland Apartments history

The building, known as the Highland Apartments, was built around 1915 near the Highland and Oak Park streetcar lines that transported residents to and from downtown Des Moines. The structure included 12 apartment units, several with large bay windows that overlooked a parklike setting that was on the south side of the building.

Two commercial spaces were on the first level. Over the years, those spaces were occupied by a dentist’s office, Smith’s Highland Park Pharmacy, a laundromat and a record store, according to Des Moines Heritage Trust.

The building, which is on the trust’s list of endangered buildings, has been neglected for several years.

In 2021, Benchmark Real Estate Group acquired the property with plans to renovate the building. However, redevelopment costs were too high and the group sold the property to Invest DSM, which also explored renovating the structure.

Like Benchmark, Invest DSM found that renovation expenses were too great, Amber Lynch, the group’s executive director, has said. She recently estimated renovation costs at between $5.5 million and $6 million.

In April, Invest DSM announced it would raze the building, a step that must be approved by Des Moines’ Landmark Review Board and City Council. If approval is received to tear down the building, Invest DSM has proposed constructing the Commons at Highland Park, a four-story structure that would include up to 50 residential units and street-level commercial space.

The Commons would be built on the corner lot plus three lots to the west that are owned by Invest DSM, a joint effort between the city of Des Moines and Polk County to expand revitalization efforts in the city’s neighborhoods.

The council at its meeting on Monday was expected to refer the building’s proposed demolition to the review board for consideration. Instead, the item was taken off the agenda.

"We expected that the historic preservation community would have a difficult time with the proposal to demolish this building," Lynch told the Business Record. "It is a loss."

Lynch noted that Benchmark Real Estate Group found that renovation expenses were too great even with financial incentives from the city of Des Moines, Invest DSM and the state of Iowa.

"While we’re encouraged that other developers want to make their own assessments, they should not assume or anticipate additional taxpayer-funded incentives," Lynch said. "Because the building’s condition deteriorates more every day, a developer will need to prove they have the requisite experience and financial capacity to take this complicated and difficult project over."

Added Lynch: "As we move forward, we need to think very carefully about preserving, at great cost, a neglected and dilapidated structure if it gets in the way of rebuilding and strengthening a neighborhood."

Optimism in the air
When Keith began exploring the possibility of renovating the Highland Apartments, several people stepped forward to help. An architect has offered their services and a mason has offered to help repair bricks, she said.

"I believe to the depths of my soul that this is a salvageable building," said Keith, who last year started Preservation Corps United, which provides education about historic preservation and restorations.

If the building is saved, Keith said she would like to open an education center that provides people with a place to learn how to do preservation work. The center would include teaching spaces as well as spaces that people could rent to do things like repairing windows.

Hatch said it’s important for the community to begin discussions about saving historic buildings long before they fall into disrepair.

"Historic buildings are so essential to the health and benefit and future neighborhoods and cities," Hatch said. The buildings "not only represent the past, but when they are saved and renovated, show how important it is to reclaiming that building and having a sense of who has lived in or been a part of the building."

Push for new city policy
The Des Moines Heritage Trust this month released a list of seven endangered buildings. Most have sat unused for several years.

Keith said the city of Des Moines should develop a policy called "mothballing" that protects vacated, historic buildings from the weather elements and vandalism.

"Mothballing is a concept that if you have an old building, the owner has a responsibility to make sure that it is saved," Keith said. "You can’t just let it be demolished it by decay. You have a responsibility to take care of it for the next generation."

Hatch agrees. "This is not just about the Highland Apartments. It’s about all historic buildings that are facing the same kind of vagrants and vacancy that can prevent them from being rehabbed."

If Keith is able to acquire the Highland Apartments, she said the first thing she will do is repair its roof and enclose the envelope of the building so that water doesn’t continue to seep into it.

Keith and Hatch plan on meeting this week. They also said they plan on getting permission to see the inside of the Highland Apartments and meet with other developers and tradespeople to get their assessments on the costs associated with renovating the building.

Photo above: The interior of the Highland Apartments. File photo

More online
To view a video about the Commons at Highland Park, click here.

Related articles: Proposal: Raze dilapidated building in Highland Park
Council will decide future of dilapidated building in Highland Park

Fairfield Inn, Tru hotel projects proposed in Norwalk

By Kathy A. Bolten | Senior Staff Writer

Two developers are proposing the construction of two hotels in Norwalk, a community that currently has no overnight lodging facilities.

Construction of the hotels is proposed on property that is north of Norwalk Central, a planned mixed-use development that is expected to include retail, restaurants, sporting and recreation venues, and public spaces such as trails, parks and an amphitheater.

Norwalk Central’s recreational facilities are expected to attract more than 1 million visitors annually.

"Norwalk has been in need of hotels for a long time," said Hollie Zajicek, the city’s economic development director. "For a long time, we couldn’t attract any hotels because we are so close to the Des Moines airport, which is 10 minutes away and has a lot of hotels around it.

"But spaces for hotels are getting filled up [by the airport] and we now have our own specific needs here for our business travelers and residents," she said.

The Norwalk City Council this month approved an agreement with Diligent Development for the development of a Marriott Fairfield Inn & Suites on 1.78 acres east of Hughes Drive at Chatham Avenue.(See map.)

The council also approved a memorandum of understanding with Husmann Construction LLC regarding the development of a Hilton Tru hotel on 3.5 acres north of a new extension of Chatham Avenue.

The $14 million Fairfield Inn project is proposed to include a four-story, 79-room hotel with a bar and outdoor pool. The project is expected to have a minimum assessed value of between $8 million and $9 million and generate a minimum in property taxes of $301,000 annually, according to information provided to the council.

Construction of the Fairfield Inn is expected to begin in June and be completed in about a year.

The Hilton Tru project, valued at up to $13 million, would include the construction of a four-story, 82-room hotel with a pool and outdoor patio. The project is expected to have a minimum assessed valued of $6 million, according to information provided to the council. Construction is expected to begin by fall and be completed in mid-2024.

In addition to the hotel, Husmann Construction would also develop an outlot that would include a commercial project.

City staff is proposing providing up to $3.6 million in incentives for up to 15 years for each project, according to council information. The incentives would be in the form of tax increment financing and hotel/motel tax rebates.

While the hotels will likely be heavily used by groups traveling to Norwalk to take part in athletic tournaments, the lodging will also be used by businesses in the community, Zajicek said. Michaels Foods and Windsor Windows "have a lot of [people] who come here from other companies. The local officials are always asking when Norwalk will have a hotel that their visitors and leadership can stay at. …

"These two new hotels will serve a lot of needs."

Kris Saddoris didn’t need nudged to describe the pushback she’s experienced over the years about proposals to build affordable housing in Central Iowa neighborhoods.

Saddoris, who was on a recent Polk County Housing Trust Fund affordable housing panel, described how elected officials frequently prefer asking questions about proposed housing projects away from the spotlight.

"They aren’t going to ask questions with a TV camera rolling," said Saddoris, who was named the 2023 Iowa State University Ivy College of Business Real Estate Professional of the Year by the Business Record.

The questions she gets asked away from the spotlight? Who are "those" people that will be living in the residential projects with affordable rents, she said.

"I tell them that ‘those’ are the people who you left your child with this morning," Saddoris said. "The reason that you’re ticked off that the Starbucks drive-thru is so long is because the person who was supposed to be there isn’t, because her car broke down and she didn’t make it. … We were all ‘those’ people at one point in our lives." Continue reading.

LOCAL NEWS

Indigo Living expands multifamily property management to Kansas City
Indigo Living, a subsidiary of West Des Moines-based Hubbell Realty Co., has expanded its multifamily property management services to Kansas City, Mo., the group announced. Indigo Living is overseeing 863 units between two multifamily communities, Eastwood Crossing and the Kings, alongside Spruce Capital Partners, a New-York-based real estate investment firm. "The expansion into the Kansas City marketplace marks the next big step for Indigo’s projected growth," Derek Haugen, Indigo Living vice president, said in a prepared statement. "We’ve continued to prove our property management practices are next-level and highly desired by the companies and stakeholders investing these communities." Indigo Living manages more than 7,790 apartment units and $850 million in assets. The company employs more than 145 associates throughout Central Iowa, South Dakota and Kansas-Missouri.

Ke Mezz LLC, located in Ankeny, paid Brandt Properties Co. $5.1 million for property at 2402 S.E. Hulsizer Road (pictured) in Ankeny, Polk County real estate records show. The 4-acre parcel includes a 59,800-square-foot office/warehouse facility built in 1998. Cummins Central Power-Engine Co. occupies the building. The property is valued at $3.76 million. The transaction was recorded May 4.

Brickstone Apts LLC, located in Des Moines, paid Brickstone Apartments LLC $2 million for property at 2805 30th St. in Des Moines, records show. The property includes two three-story apartment buildings, one with 18 units and the other with 12. The buildings were constructed in 1969. The property is valued at $1.6 million. The transaction was recorded May 1.

Jembo LLC, located in Davenport, paid BMC Properties LLC $745,000 for property at 3839 Delaware Ave. in Des Moines, records show. The 1-acre parcel includes a 5,814-square-foot building constructed in 1986. The building is occupied by an auto repair shop. The property is valued at $511,000. The transaction was recorded May 2.

James and Lisa Livingston paid Michael and Amanda Reynal $1.1 million for property at 3817 Brentwood Drive in Des Moines, records show. The property includes a two-story, 3,366-square-foot house built in 1974. The transaction was recorded May 3.

Emerald Line LLC, located in Des Moines, paid Travis and Elizabeth Aslin $2.5 million for property more than 80 acres of farmland at the northwest intersection of Northeast 96th Street and Northeast 62nd Avenue between Altoona and Mitchellville, records show. The transaction was recorded May 3.

Sharp Assets LLC, located in West Des Moines, paid Envision Homes Holding Co. LLC $1 million for property at 209 Fifth St. (pictured) in West Des Moines, records show. The property includes a two-story building with a brick facade constructed around 1900. It includes two street-level retail bays and apartments on the second level, records show. The property is valued at $615,000. The transaction was recorded May 1.

Heartland Roofing Siding & Windows LLC, located in Clive, paid Casey’s Marketing Co. $2.1 million for property at 2519 N.W. 66th Ave. in northwest Polk County, records show. The transaction was recorded May 4.

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